FHA Alternatives

For many potential home buyers, the FHA mortgage is an excellent option. It offers a 3.5 percent down payment, relaxed qualification standards, and reasonable mortgage insurance premiums. However, a number of other options are available for people who want to buy a home with a low down payment without using an FHA loan.

Fannie Mae HomePath

Fannie Mae, which is one of the two government-sponsored entities that underwrite the majority of American mortgages, offers a program called HomePath that allows you to take out a mortgage with a down payment of as little as 3 percent. It also does not require mortgage insurance. Its one drawback is that you can only use it to buy a home that Fannie Mae has repossessed. As of December 2012, Freddie Mac's similar HomeSteps program is not offered in California, but may be in the future.

VA Mortgages

If you are a veteran, the Department of Veterans Affairs offers mortgages with exceptionally attractive terms. The VA will lend you up to 100 percent of the property's appraised value and will not require you to pay for any mortgage insurance. Like FHA loans, the VA also offers relaxed qualification terms. If you qualify for a VA loan, which usually requires you to be an active-duty military member or an eligible veteran, it's usually the best low-down payment loan available.

USDA Mortgages

U.S. Department of Agriculture mortgages are designed to help families with moderate incomes buy modest properties in rural or semi-rural areas. You can't use one to buy a property in San Francisco, but a family of four making $130,100 or less could get a rural development loan to buy a home in rural areas of Marin County. USDA rural development loans carry no down payment and are easier to qualify for than traditional mortgages.

Conventional Mortgages

Alternatively, you could take out a conventional mortgage. If you are willing to pay for mortgage insurance and have good credit, you should be able to easily find a loan with 10 percent down and may be able to find a loan if you place 5 percent down. If you do not have enough for a down payment, you could borrow money from other sources, including your 401k or IRA, to make the down payment. On the other hand, if you can afford to make a 20 percent down payment, you could get a lower rate while avoiding mortgage insurance.

About the Author

Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. His work has appeared in trade publications such as the "Minnesota Real Estate Journal" and "Minnesota Multi-Housing Association Advocate." Lander holds a Bachelor of Arts in political science from Columbia University.